Market News

The U.S. Dollar continues to be on the defensive in Asian trading today, following the rumor of a report suggesting that several oil-producing countries within the Gulf States are pushing for currency diversification away from the U.S. currency.

As widely anticipated by many analysts and investors, Australia’s Reserve Bank raised a key interest rate by 25 bp to 3.25% today. Thus the RBA becomes the first central bank within the G20 to acknowledge the easing of the global fiscal crisis. As a result, the Australian Dollar rallied to $0.8876 versus the U.S. Dollar, a 14-month high. Also profiting from the RBA’s decision, the New Zealand Dollar rose to $0.7357, also a 14-month peak. An FX distribution manager in Tokyo suggested that while there may be some profit-taking in the next few days, over the longer term, the Australian Dollar will continue to gain.

Disappointing jobs data released by the U.S. Labor Department last Friday precipitated the U.S. Dollars continuing decline versus major currencies.

Before the expected release later today of non-farms payroll data from the United States Labor Department, the U.S. currency traded flat versus a group of six major currencies.

The U.S. Dollar moved up versus the Japanese Yen in Asian trading today as institutional investors sought to fund their overseas investments through the purchase of the greenback.

The Australian Dollar hit a 13-month high versus the U.S. Dollar as better than expected retail sales data from Australia provided mounting evidence that an interest rate increase could be forthcoming before year end. Speculators believe that, as early as November, the Reserve Bank of Australia will likely move to increase key interest rates.

Hirohisa Fujii, the Finance Minister for Japan, recanted earlier statements about the Japanese government not intervening in a strong Japanese Yen.

Conflicting comments by the Japanese Finance Minister lead to the Yen’s rise and fall in Asian trading today.

A draft communiqué to be issued by the G20 leaders is promising that they will keep current emergency measures in place in an effort to shore up the global economies until such time as the recovery is solid.

With the conclusion of the 2-day meeting of the Federal Reserve FOMC yesterday, currency investors sold off their low-yielding U.S. Dollar with the belief that the Federal Reserve Bank has no intention of raising interest rates any time in the near future.

With growing optimism over the bettering health of the world’s economies, investors shed themselves of the low-yielding U.S. Dollar, plunging the greenback to its lowest levels in a year, in favor of higher yielding, asset-based currencies such as the New Zealand Dollar, as well as the Euro.

Ahead of the U.S. Federal Reserve Federal Open Market Committee meetings which will be held later today and continue through tomorrow, the U.S. Dollar slipped broadly as investors took advantage of gains in earlier sessions.

As reported at 12:58 p.m. in Sydney trading today, the U.S. Dollar rose in light Asian trading, continuing the greenback’s rebound from Friday’s trading in New York.

With investors covering their short positions, the U.S. Dollar made gains against the single currency Euro in Friday’s Tokyo trading, off of the 1-year low touched on yesterday.